AG Oncon, LLC v. Ligand Pharmaceuticals, Inc.

C.A. No. 2018-0556 (2019)

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AG Oncon, LLC v. Ligand Pharmaceuticals, Inc.

Delaware Court of Chancery
C.A. No. 2018-0556 (2019)

Facts

Ligand Pharmaceuticals, Inc. (Ligand) (defendant) sought to raise capital by issuing convertible notes—that is, debt instruments convertible into shares of stock at a specified rate. The offering memorandum for the notes established a conversion rate of 13.3251 shares of Ligand stock for every $1,000 note. Ligand then entered an indenture with a financial institution as trustee to govern the notes. The indenture incorporated some sections from the Trust Indenture Act but did not incorporate the act as a whole. AG Oncon, LLC (plaintiff) acquired $212 million worth of the notes. Ligand became aware of an error in the indenture document that significantly increased the conversion rate. Ligand amended the indenture to make the conversion rate identical to the one originally specified in the offering memorandum. In doing so, Ligand relied on a provision of the indenture that specifically authorized amendments for the purpose of bringing the indenture into conformity with the baseline terms of the offering memorandum. However, AG Oncon brought suit in the Delaware Court of Chancery, arguing that the indenture—not the offering memorandum—was the controlling document. AG Oncon’s claims included breach of the terms of the indenture and violation of the Trust Indenture Act, though the indenture was not technically subject to the act because it did not involve a public offering. Ligand moved to dismiss for failure to state a claim.

Rule of Law

Issue

Holding and Reasoning (Laster, J.)

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